Max Sawicky Objects to a Paragraph in the Club for Growth's Petition

Max Sawicky doesn't like this:

MaxSpeak, You Listen!: MAKE THAT 1,027 OF
"AMERICA'S TOP ECONOMISTS": And it says this:

In 1930, Congress passed and President Hoover signed into law the Smoot-Hawley Tariff Act. At the time, this protectionist measure was vigorously opposed by 1,028 of the nation's top economists. They rightly predicted the tariffs would devastate the economy. And, in fact, the country subsequently plunged into the Great Depression...

I could see why the eminent economist Grover Glenn Norquist would adhere to this opinion, since he has proved it in his vast production of scientific papers, monographs, books, and Parade Magazine articles. Of the rest, it's a bit of a puzzle...

I stubbornly resist China-bashing, and these protectionist bills strike me as first-order China bashing, to be stubbornly resisted.

But I also agree with Max that this Club for Growth petition is bad juju: the word describing the effects of Hawley-Smoot on the economy should be "damage," not "devastate." And the Great Depression would have come whether or not Hoover vetoed Hawley-Smoot--it was a third-order problem in the early 1930s. That paragraph Max quotes shouldn't be there: opposition to protectionism is a good thing, and good things do not have to be supported with lies.

I presume that few of the economists who signed the Club for Growth knew that the paragraph above would be put in BIG PRINT above their names. But they should have known something would go wrong: it's not like the Club for Growth doesn't have a history, after all.

Comments

[Maynard]

I repeat my comment on an earlier post. If you believe the yuan must ultimately be revalued by something like 30 percent - that in the absence of revaluation global imbalances will worsen - and you acknowledge that the government of China will not let this happen for a long time, if ever, then why do you object to the U.S. Congress putting pressure on the Chinese government to do so soon? The proposed legislation is useful even if the motivation of some of its supporters is protectionist. At the very least, the threat of such legislation gives the Bush Administration some leverage with China, if it chooses to use it.

[robertdfeinman]

Signing a petition sponsored by the Club for Growth is staking out an ideological position, anyone who then thinks that their views were being misrepresented is being naive or disingenuous.

If some noted economists in respected academic positions (not think tanks) had started this action things might be different. It would still be ideological, but would not be seen as serving a strictly partisan agenda.

"The Federal Election Commission filed a lawsuit Monday [September 20, 2005,] in U.S. District Court in Washington against the Club for Growth, the first case of its kind to arise from high-dollar fundraising during the 2004 elections. The pro-Republican group spent at least $21 million in the 2003-2004 election cycle. ... The FEC contends the club spent enough in federal races to require it to file with the commission as a political committee and to follow contribution and spending limits. It wants the court to fine the group and order it to comply with campaign finance rules." --Associated Press, September 19, 2005.

[anne]

Brad DeLong:

"I presume that few of the economists who signed the Club for Growth knew that the paragraph above would be put in BIG PRINT above their names. But they should have known something would go wrong: it's not like the Club for Growth doesn't have a history, after all."

Any economist who signs any Club for Growth petition has to know precisely how crazy the Club for Growth folks are. These are folks who cannot even tolerate Teddy Roosevelt let alone Franklin Roosevelt and would happily take us round a century and more past.

[anne]

Watch the Club for Growth-ers glee as the Supreme Court undoes a century of anti-trust legislation while undoing the legacy of decades of civil rights protection for workers.

[Noel]

Silly note - Those "top economists" also need a grammar lesson: "...with REGARDS to China..."

http://www.drgrammar.org/faqs/#45

[save_the_rustbelt]

The Club for Growth is the leading spokesmen for the dittohead school of economic.

On the other hand....

If we don't put some balance into our relationship with China, and eal with trade and income related issues, the American middle class will continue to deteriorate and will take their grievances to the ballot box (since economists are relatively clueless and are unwilling to admit mistakes).

[save_the_rustbelt]

"deal" not "eal"

[save_the_rustbelt]

"deal" not "eal"

[save_the_rustbelt]

"deal" not "eal"

[bakho]

Index the min wage to inflation, give us Universal Health Care improve benefits to displaced workers and have the wealthy foot some of the bill or we shut down China Trade!

The CFG folks think they have the right to whatever they want and don't have to negotiate with the rest of us. Let the negotiations begin. China trade may be the right thing to do but it is also a useful bargaining chip to set the political stage for other acts that are also right. This is the way collective bargaining has worked for years.

[andres]

Brad and Max Sawicky are being too polite, and need to be as shrill with the CFG as they are with GW Bush. So raise your hand and repeat after me:

"The Club For Growth is _lying_. They are trying to rewrite history in order to suit their own ideological ends. No respectable economic analysis has ever shown that the Smoot-Hawley tariff caused the Great Depression, and in fact the vast majority of economists agree that the Great Depression was caused by an international financial collapse."

That wasn't so hard, was it?

[elliottg]

Can you contact your brethren there at Berkeley to find out how they could have been so stupid? (I think I saw 3 names.) Were they misled or did they not care who sponsored this?

[CMike]

Lucky me, I get to ask someone to explain this to me. In "Peddling Prosperity" Paul Krugman writes:

***********************
The supply-siders have never been entirely clear about the mechanism by which Smoot -Hawley is supposed to have created the Depression, but in general it seems to go as follows: By increasing the cost of imported goods, Smoot-Hawley made the returns to work and investment less; it was the resulting reduction in investment and work effort that we call the Great Depression.

A non-supply-sider might note that this story implies an extraordinary response of work effort to incentives. The Smoot -Hawley tariff raised the average tax on imports by about 40 percent, but before the tariff imports were only about 6 percent of gross national product. In other words, the effective tax increase was only 2.5 percent. Yet employment dropped by one third from 1929 to 1933. Conventional economists find a response this large incredible. But the supply-sider have no doubts about the correctness of their diagnosis-after all, what else could it have been?
************************
Is Krugman saying tariffs accounted for 6 percent of tax revenue or is he saying that trade made up 6 percent of the economy?

[Peter Summers]

I signed the CFG's petition.

Before going further I need to point out that the petition itself did not include the paragraph to which Max Sawicky objects. That paragraph appears in the full-page ad that CFG ran today, with the actual petition reprinted separately.

I didn't sign on to this because I am a CFG fan or a right-wing ideologue. I signed it because I'm a strong believer in the benefits of trade, and I think that protectionist measures do much more harm than the costs of trade that they are designed to address.

The CFG may well be wingnutters on many issues, but in this particular case I agree with them (Smoot-Hawley hyperbole aside). Similarly, I generally avoid reading the WSJ editorial pages, but tend to agree with what they say about immigration.

The point I'm trying to make was put nicely by Arnold Kling (excerpt from the CFG's blog from today):
********
Arnold Kling makes an important point of putting principle over politics by saying, "I wonder how many liberals said, "Euuwww, Club for Growth," and refused to sign. I mean, if the Economic Policy Institute had circulated a petition against the Bush steel tariffs, I would have said "Euuuww, Economic Policy Institute" ...and signed, anyway."
********

So for me, the bottom line here is two-fold:
1) did the CFG go too far by claiming that Smoot-Hawley caused the Depression? I think so, but this is not my area of expertise.

2) does my answer (or anyone else's, for that matter) to (1) change my support for the petition, or my opposition to the sorts of protectionist policies it describes? No.

Dismissing what's being said because the speakers are ideologues strikes me as, well, pretty ideological. Personally, I find that I have less and less time for ideologues of any flavor.

[anne]

Paul Krugman is saying Herbert Hoover's tariffs accounted for a 40% charge against about 6% of national income or an effective 2.5%. But, employment dropped by about a third from 1929 to 1933.

[Big Bill]

Krugman seems to be ignoring the fact that other countires levied tariffs on U.S. exports in response to Smoot-Hawley, which would have increased unemployment. Did it alone cause the Great Depression? No, but it surely made it a hell of-a-lot worse.

[Matt]

Of all the reasons given for the depression I suspect technology change, particularly the effect of world telephone on world trade. Maybe the protectionists measures were a symptom of a larger problem, the problem that monetary rates and trade logistics were operating at the spead of light then while the institutions were still writing letters and hoarding gold.

Free trade with China has a small problem, namely the tremendous investment the American taxpayers have made in infrastructure and security for world trade. If we would stop subsidizing our trade competitors I would be happy.

[robertdfeinman]

I don't know Peter Summers (even by reputation) but joining a group that he considers may be "wingnutters" is like someone saying they supported Mussolini because he made the trains run on time.

There are other ways to express your opinion on policy issues without getting involved with them.

"He who lies down with dogs, wakes up with fleas."

[CMike]

I don't mean to be so thick but I still don't get it. Does Krugman mean to say "import tariffs" where he says "tariff imports were only about 6 percent of gross national product?" Is it possible back in the 1920s, when tariffs provided a big source of government revenue, that tariff revenues themselves were at 6 percent of total GDP? And then Smoot-Hawley raised tariff revenues another 2.4 percent?

Big Bill seems to zero in on the more significant issue. Did Smoot-Hawley bring about retaliation by trade partners that wrecked the export sector of the American economy? How big was that sector at the time?

[Peter Summers]

robertdfeinman:

"I don't know Peter Summers (even by reputation)..."

Fair enough, I wouldn't expect you to. For the record, I do not claim to be one of "America's top economists."

"...but joining a group that he considers may be "wingnutters..."

The only group I joined was the signers of the petition.

[
I also think that CfG signed you up for the Hawley-Smoot wingnutters club.]

I know some of them personally, others by reputation, and most not at all. I certainly didn't say anything about them being wingnutters.

My comment about "wingnutters" applied only to the CFG, and I probably should have phrased it "The CFG may well be *considered* wingnutters on many issues..." or something like that. I've never paid any particular attention to them and so don't have an opinion on their wingnut status. Others clearly do, and I only meant to acknowledge that sentiment.

[Miracle Max]

Thanks to Peter S. for pointing out the petition language is different from the ad copy. At first glance I didn't notice, and I don't think many others will either.

[Barry]

Peter, The Club for Growth is a junk science brothel, with a track record going back many, many years. There's a big difference between not associating yourself with a respectable group whose politics you disagree with, and refusing to associate with a pack of liars.

[anne]

Bill:

"Krugman seems to be ignoring the fact that other countries levied tariffs on U.S. exports in response to Smoot-Hawley, which would have increased unemployment."

Schlesinger and Galbraith and Krugman have noted the unfortunate effects of combatative tariffs, and Franklin Roosevelt spoke of the effects forcefully, but the tariffs were scarcely a determining factor in rising unemployment, and recession had begun before the tariff series.

The tariff argument being used is masking a repeated conservative attack on New Deal employment generating programs; where time and trade alone were supposed enough to rescue us from the Depression.

[anne]

Peter Summers,

Thank you for explaining, and I am sympathetic as Brad DeLong to the trade argument, ar least to trade with continual amelioration for dislocations and support of labor organization, which is not the case now, but Committee for Growth has more than trade in mind and amelioration and union support would turn them purple as Elmo.

[Richard Green]

I got an email asking me to sign the petition. I basically agreed with the substance of it, but couldn't bring myself to sign anything that had CFG on it. This made me slightly ashamed of myself--if one supports something on principle, he shouldn't let his fear of association with those he doesn't like get in the way of his support. But then again, I only felt slightly ashamed.

[VJ]

Eh, the stock market had crashed 8 months previous, and the national economy was already tanking, before the Hawley-Smoot legislation was enacted in June of 1930. As was mentioned, it comprised only a tiny fraction of the national economy, plus it was only in effect for two years.
.

[Ross Emmett]

Two comments regarding Max’s objection:

a. The original form of the petition which I received made no reference to the link that theWSJ ad drew between the current petition to stop punitive protectionist tariffs against China and the Smoot-Hawley tariff act of 1930. I added my signature at that time for the reason that several responders to Max have already made: any defense of freer trade is welcome by me, whether I agree with everything the organization stands for. Arnold Kling makes this point best on EconLog. The Smoot-Hawley connection was a later addition, and not integral to the petition itself.

b. One of the reasons why some have jumped on the Smoot-Hawley linkage is because the impact of the 1930 act is a topic in which the academic debate diverges from popular opinion. I’ll come clean first: my reading of the economic history is that it is difficult to conclude unambiguously that the tariff act significantly damaged the US economy directly. However, I am a Canadian as well as an American, and find persuasive the argument that the Canadian retaliatory tariff decisions following the Conservative election victory in 1930 hurt the American economy. Were these "indirect" hurts from lost trade possibilities enough to say that Smoot-Hawley definitely hurt the American economy?

[As I said, I could buy "damaged." I can't buy "devastated."]

I know Barry Eichengreen doesn’t buy the “retaliatory tariff” indirect impact argument, but it deserves more consideration. See “Trade Wars” by McDonald, O’Brien, and Callahan in the Journal of Economic History, December 1997 for more on the impact of Canada’s tariffs on the US in the early 1930s.

[Josh G.]

Brad: "That paragraph Max quotes shouldn't be there: opposition to protectionism is a good thing, and good things do not have to be supported with lies."

But it is impossible to support the Washington Consensus of globalization without resorting to a myriad of lies. The #1 lie, of course, is that we will compensate the "losers" from trade deals. That has never actually happened. Moreover, economists claim that trade makes most Americans better off, yet they have no explanation for why median wages have actually fallen during the past 6 years, despite alleged macroeconomic prosperity.

I know that Brad wants a grand bargain where the plutocrats get "free trade" and workers get national health care, the right to unionize, and maybe a few other baubles. But how can such a deal be enforced unless there is a quid pro quo? If you come out in support of globalization from the outset, you've given away your bargaining chip for nothing. This was Bill Clinton's big mistake. Clinton gave the right wing everything they wanted; U.S. workers got nothing in return. They got NAFTA; they got welfare deform; they got telecommunications deregulation. All of these things royally screwed over the Democratic party and Democratic constituencies. Clinton was even kind enough to pack the treasury full so that the Republicans could hand out the loot to their supporters upon taking office.

When do we get our share? When does the economy start working for us again? Only when Americans stop listening to the false prophets in the ivory towers and return to the protectionism of Hamilton and Lincoln.

[anne]

So that I am clear, the idea of signing any agreement with the Club for Growth or with the reprehensible Arnold Kling would be unthinkable for me. I would start my own honest petition before any such partnership.

Also, the Herbert Hoover tariff signing was well after the economy had entered a severe recession and is only a mark of the bizarre sense that the pain of other people is a proper remedy for economic distress, and the general going-fishing while Americans suffer Hoover approach to recession and gathering and full-blown Depression.

[anne]

Also, as the stock market faltered and crashed the economy had already turned distinctly down, the turn down spreading from the farm sector on. The Harbert Hoover tariff (I prefer the name) was well passed after recession and crash and combative tariffs came only later. What was needed was New Deal activism before the New Deal, and that is what revisionist conservatives are forever trying to deny. The idea is to deny the effectiveness and legacy of the New Deal.

[Barkley Rosser]

Something to keep in mind is that the real plunge into the Great Depression came in 1931 with the full scale collapse of the international financial system, starting with the collapse of the Creditanstalt bank in Austria and then spreading to Germany and then on west across the globe.

There is evidence, both within the US, and internationally, that the sharp decline of world trade associated with the trade war following the passage of Smoot-Hawley, fed into these financial sector failures. Thus, the role of S-M as an important factor is less directly tied to its cost effects, and more to its exacerbating the problems in the financial sector, whose collapse in 31 was what turned what had been an unpleasant recession into that unprecedented (and fortunately not repeated) event, the Great Depression, which, among other things, gave us Hitler in power.

[anne]

So that we understand, the Smoot-Hawley Tariff Act was really the Herbert Hoover Tariff Act or really a Republican-business-interest fostered legislative act; legislation that had been wished by Republican business interests for years. The blindness of Hoover to the faltering of economy and growing distress of rural and urban workers in signing the legislation, before returning to fishing, was typical.

[Auto]

The other day, as I walked into the Hart Senate Office building on Capitol Hill, I saw a group of Larouchies with a petition calling for Cheney's immediate impeachment.

Cheney deserves to be impeached (and Bush and Torture Boy), but I'll be damned if I'm signing their petition. I don't care if on this single issue the Larouchies and I are in complete accord.

I'm not playing any enemy-of-my-enemy-is-my-friend games.

I don't want the Larouchies benefitting from my signature on their petition.

Which is why I'm surprised the CfG got so many serious economists to sign their petition.

Who cares if their interests on trade happen to coincide? Did't they realize that by signing, they were lending those creeps their reputations, giving the group a status it in no way merits? Or that CfG was likely to use (misuse/abuse?) the petition in ways the signatories never intended?

I guess it's testimony to the (apparently) limitless political cluelessness of academic economists.

[Emma Anne]

I assume that Richard Greene and Peter Summers will immediately and without qualms refuse to sign anything by CFG in the future? I mean now that we know that they will run petition signatures with something that wasn't in the petition, any assumption in favor of their scruples is gone, right? Geeze, next time they might have you sign a petition against resuming the gold standard and then use your signatures to support indentured servitude.

[anne]

Emma Anne:

"Geeze, next time they might have you sign a petition against resuming the gold standard and then use your signatures to support indentured servitude."

Darn, just when I was thinking I needed some.

[andres]

anne, unless your house looks like this:

http://bitchphd.blogspot.com/2007/07/youre-goddamn-right-im-frivolous.html
(she's a poisoned-keyboard sweetheart, but she could use some domestic labor assistance)

I think you'll be able to manage without servants ;-)

[CMike]

http://www.time.com/time/magazine/article/
0,9171,739604,00.html?iid=chix-sphere

[you'll have to paste both lines in your browser]

From this fun to read article, I gather in 1929 tariff revenues were 523 million nominal dollars. Elsewhere, I found that nominal GDP in 1930 was $91 billion. That would make tariff revenues in 1929 come in at less than six tenths of a percent of GDP.

http://www.infoplease.com/ipa/A0104575.html

The article says Hawley-Smoot "raised the duty level 20% above present law, increased U. S. tariff revenues an estimated $107,000.000 per year to $630,000,000" so I'm wondering why that's different from Krugman's, no doubt correct, 40 percent figure. I remain stumped by Krugman's meaning when he wrote: "...the effective tax increase was only 2.5 percent [of GDP]."